In this article, we discuss 5 new stock picks of billionaire Stanley Druckenmiller. If you want to read our detailed analysis of these stocks, go directly to 10 New Stock Picks of Billionaire Stanley Druckenmiller.
5. Ingersoll Rand Inc. (NYSE:IR)
Number of Hedge Fund Holders: 33
Ingersoll Rand Inc. (NYSE:IR) operates in the industrial machinery sector. Top hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Ingersoll Rand Inc. (NYSE:IR), with 3.6 million shares worth more than $183 million.
Latest filings show that Duquesne Capital owned 333,295 shares of Ingersoll Rand Inc. (NYSE:IR) at the end of the fourth quarter of 2021, worth over $20 million, representing 0.74% of the portfolio.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Ingersoll Rand Inc. (NYSE:IR) was one of them. Here is what the fund said:
“We also added to Ingersoll Rand Inc. (NYSE:IR). Ingersoll Rand is a global market leader with a broad range of mission-critical flow creation technologies (pumps, compressors, etc.) for industrial and medical applications. Over the past several years, a new management team has repositioned Ingersoll Rand Inc. (NYSE:IR) toward less cyclical, more profitable businesses, which are supported by a stronger culture of employee engagement and continuous improvement. More recently, the company’s top-line growth has accelerated as the pandemic fades, and margins are benefiting from cost synergies achieved in its merger integration with Gardner Denver (with further runway ahead). This has boosted cash flows and enabled management to resume its successful bolt-on acquisition strategy, acquiring Seepex GmbH, a global leader in positive displacement pumps for end markets such as water, wastewater, food and beverage and chemicals, in Q2. With an increasingly visible organic and acquisition-driven growth capability, characteristics the market appears to be undervaluing, we added to our position at an attractive discount to our PMV estimate.”
4. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 35
Opendoor Technologies Inc. (NASDAQ:OPEN) owns and runs a digital real estate platform. Securities filings reveal that Druckenmiller opened a new position in the company during the fourth quarter of 2021. The stake comprises 233,000 shares worth $3.4 million, representing 0.12% of the portfolio.
Opendoor Technologies Inc. (NASDAQ:OPEN) has many admirers on Wall Street. At the end of the third quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Opendoor Technologies Inc. (NASDAQ:OPEN), the same as in the preceding quarter worth $765 million.
In its Q1 2021 investor letter, Baron Fund, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. (NASDAQ:OPEN) was one of them. Here is what the fund said:
“The sales of Opendoor Technologies Inc. was a trim for position-sizing purposes after orders-of-magnitude type stock returns over the last year for these investments. We continue to believe the company is a disruptive innovator with open-ended long-term opportunities.”
3. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 37
Sunrun Inc. (NASDAQ:RUN) develops and installs residential solar energy systems. It is one of the top solar stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Sunrun Inc. (NASDAQ:RUN), with 7 million shares worth more than $242 million.
According to the latest data, Duquesne Capital owned 178,450 shares of Sunrun Inc. (NASDAQ:RUN) at the end of the fourth quarter of 2021, worth $6.1 million, representing 0.22% of the total portfolio.
In its Q2 2021 investor letter, Horizon Kinetics, an asset management firm, highlighted a few stocks and Sunrun Inc. (NASDAQ:RUN) was one of them. Here is what the fund said:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business in the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.
You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.
In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.
In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).
For the time being, Sunrun loses an extraordinary amount of money, an amount that has been getting larger. Perhaps there are scale economies that will manifest in the future,so that it will attain profitability. Perhaps from the roughly one-half of Sunrun’s revenues that are from long-term customer service agreements that run up to 25 years. For now, though, the company would seem to require a lot of external financing, and that is one of the greatest of business risks.”
2. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 51
Lockheed Martin Corporation (NYSE:LMT) operates as a security and aerospace firm. Druckenmiller purchased a new stake in the company between October and December 2021. This stake consists of 14,450 shares worth $5.1 million, representing 0.18% of the portfolio.
Lockheed Martin Corporation (NYSE:LMT) is one of the favorite security stocks in the US. Among the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Lockheed Martin Corporation (NYSE:LMT), with 561,512 shares worth more than $193 million.
In its Q4 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation (NYSE:LMT) was one of them. Here is what the fund said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
1. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 78
Snap Inc. (NYSE:SNAP) is a California-based camera company. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE:SNAP), with 22.6 million shares worth more than $1.6 billion.
Latest 13F filings show that Druckenmiller opened a new position in Snap Inc. (NYSE:SNAP) during the fourth quarter of 2021. The position comprises over 1.4 million shares worth $67 million, representing 2.46% of the portfolio.
In its Q2 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE:SNAP) was one of them. Here is what the fund said:
“Snap shares were a top contributor for the quarter as well, also driven by strong first quarter results. The company reported accelerating revenue growth of 66% for the period (up from 62% fourth quarter growth), driven by user growth of 22%, and a 36% expansion in average revenue per user (ARPU). The company also guided to stronger-than-expected and accelerating 81%-85% revenue growth for second quarter 2021. Adjusted EBITDA improved by $79 million year over year for a break-even margin, up 1,800 basis points, and free cash flow improved dramatically, turning positive for the period to $126 million. Snap also continued to roll-out products that should help drive further expansion in user growth and ARPU, including Spotlight, a TikTok-like experience, with more than 125 million Snapchatters using it during March, and original programming starring Ryan Reynolds.
With TTM of $2.8 billion in revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, we believe Snap has a long runway for both revenue growth and expanded profitability as it improves its platform functionality, grows its audience, and continues to advance its monetization.”
You can also take a peek at 10 Best Medical Stocks Under $10 and 15 Best Warren Buffett Stocks to Buy Now.
